Monday, July 14, 2008

Not even American beer is sacred

Foreign company takes over another piece of American - now they own "our" beer - Budweiser...the following story was in the St. Louis Dispatch...InBev lays out its plans for A-BBy Tim Logan and Jeremiah McWilliamsST. LOUIS POST-DISPATCHMonday, Jul. 14 2008Expect "Blue Ocean" to get deeper, and Budweiser's reach to get wider.

In a conference call this morning, victorious executives from InBev laid out their plans to expand cost-cutting already underway at Anheuser-Busch Cos., and to build the world's dominant brewer around its new flagship brand: Budweiser.

InBev chief executive Carlos Brito, hours removed from the announcement of a $52 billion deal to buy the iconic St. Louis brewer, told analysts this morning said the merged company, to be known as Anheuser-Busch InBev, will be the leading provider of beer in the world's five biggest beer markets and the third-largest consumer products company in the world.

It will be 62 percent larger in terms of revenue than its next-largest brewing rival, SABMiller.Brito said Budweiser has unlocked potential in countries where the beer is not widely available, because even there, drinkers are aware of the beer — thanks to Anheuser-Busch's globe-spanning advertising of the World Cup and Olympics."In a more competitive global market," he said, "this transaction will create a stronger company.

"The deal will open up new markets for Budweiser, which InBev will push in 19 countries from Brazil to Ukraine where it is strong but A-B is not.And, he pledged, InBev takes the same "no-compromise" position towards quality that Anheuser does."Consumers can be assured that we will continue what makes Bud the great American lager," he said.

That push will begin in St. Louis, which will remain the company's North American headquarters, Brito said. He pledged to maintain the company's heritage, specifically mentioning Grant's Farm and Clydesdales and the Pestalozzi Street brewery. But changes are inevitable, and will begin with a deeper cost-cutting plan than the one A-B unveiled last month, when it was still trying to fend off InBev's advances.

That plan — known as "Blue Ocean" — to cut $1 billion in expenses over two years, will be expanded to a $1.5 billion effort over three. That means planned buyouts of up to 1,300 salaried employees will likely continue.

The approximately $500 million bump-up in savings will include about $360 million from greater leverage with suppliers, more aggressive production efficiencies and "elimination of corporate overlapping functions" — which will likely lead to some job losses at A-B's corporate headquarters in St. Louis.

Brito said he has no plans to cut Anheuser-Busch's marketing spending — one area the axe is widely expected to fall. "One of the things we like about Anheuser-Busch is its marketing expertise," he said.In a brief statement at the start of the call, Anheuser chief executive August Busch IV stressed that the deal was "friendly" and the best move for his company's shareholders.

"Carlos Brito is a strong leader," he said. "I respect him and he has my firm backing."Busch will not have an executive role with the new company, but will take a seat on InBev's board, as will one other current or former member of A-B's board. Brito said he hopes to close the deal by the end of the year.

Serious questions remain: Who, exactly, will run the North American operations? Which Anheuser-Busch executives will remain with the combined company, and in what role? Will benefits be cut, and how?

"I know this has been a difficult period of uncertainty," August Busch wrote Sunday night in a message to employees. "I thank each of you for your steady perseverance during this time. This has been an emotional decision for me."